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21. How Should Donors Respond to Resource Windfalls in Poor Countries?

Author:
Alan Gelb, Anton Dobronogov, and Fernando Brant Saldanha
Publication Date:
07-2014
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
Natural resources are being discovered in more countries, both rich and poor. Many of the new and aspiring resource exporters are low-income countries that are still receiving substantial levels of foreign aid. Resource discoveries open up enormous opportunities, but also expose producing countries to huge trade and fiscal shocks from volatile commodity markets if their exports are highly concentrated. A large literature on the "resource curse" shows that these are damaging unless countries manage to cushion the effects through countercyclical policy. It also shows that the countries least likely to do so successfully are those with weaker institutions, and these are most likely to remain as clients of the aid system. This paper considers the question of how donors should respond to their clients' potential windfalls. It discusses several ways in which the focus and nature of foreign aid programs will need to change, including the level of financial assistance. The paper develops some ideas on how a donor like the International Development Association might structure its program of financial transfers to mitigate volatility. The paper outlines ways in which the International Development Association could use hedging instruments to vary disbursements while still working within a framework of country allocations that are not contingent on oil prices. Simulations suggest that the International Development Association could be structured to provide a larger degree of insurance if it is calibrated to hedge against large declines in resource prices. These suggestions are intended to complement other mechanisms, including self-insurance using Sovereign Wealth Funds (where possible) and the facilities of the International Monetary Fund.
Topic:
Economics, International Trade and Finance, Natural Resources, and Foreign Aid
Political Geography:
Uganda, Kenya, Tanzania, and Ghana

22. Value Subtraction in Public Sector Production: Accounting Versus Economic Cost of Primary Schooling in India

Author:
Lant Pritchett and Yamini Aiyar
Publication Date:
12-2014
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
We combine newly created data on per student government expenditure on children in government elementary schools across India, data on per student expenditure by households on students attending private elementary schools, and the ASER measure of learning achievement of students in rural areas. The combination of these three sources allows us to compare both the “accounting cost” difference of public and private schools and also the “economic cost”—what it would take public schools, at their existing efficacy in producing learning, to achieve the learning results of the private sector. We estimate that the “accounting cost” per student in a government school in the median state in 2011/12 was Rs. 14,615 while the median child in private school cost Rs. 5,961. Hence in the typical Indian state, educating a student in government school costs more than twice as much than in private school, a gap of Rs. 7,906. Just these accounting cost gaps aggregated state by state suggests an annual excess of public over private cost of children enrolled in government schools of Rs. 50,000 crores (one crore=10 million) or .6 percent of GDP. But even that staggering estimate does not account for the observed learning differentials between public and private. We produce a measure of inefficiency that combines both the excess accounting cost and a money metric estimate of the cost of the inefficacy of lower learning achievement. This measure is the cost at which government schools would be predicted to reach the learning levels of the private sector. Combining the calculations of accounting cost differentials plus the cost of reaching the higher levels of learning observed in the private sector state by state (as both accounting cost differences and learning differences vary widely across states) implies that the excess cost of achieving the existing private learning levels at public sector costs is Rs. 232,000 crores (2.78% of GDP, or nearly US$50 billion). It might seem counterintuitive that the total loss to inefficiency is larger than the actual budget, but that is because the actual budget produces such low levels of learning at such high cost that when the loss from both higher expenditures and lower outputs are measured it exceeds expenditures.
Topic:
Economics, Education, Privatization, and Reform
Political Geography:
India and Asia

23. The Quality of Official Development Assistance 2014

Author:
Nancy Birdsall, Homi Kharas, and Nabil Hashmi
Publication Date:
07-2014
Content Type:
Policy Brief
Institution:
Center for Global Development
Abstract:
The Quality of Official Development Assistance (QuODA) measures donors' performance on 31 indicators of aid quality to which donors have made commitments. The indicators are grouped into four dimensions associated with effective aid: maximizing efficiency, fostering institutions, reducing the burden on partner countries, and transparency and learning. The 2014 edition finds that donors are overall becoming more transparent and better at fostering partner country institutions but that there has been little progress at maximizing efficiency or reducing the burden on partner countries. The World Bank's concessional lending arm, the International Development Association (IDA), performs very well in QuODA, ranking in the top 10 of 31 donors on all four dimensions. The United States ranks in the bottom half of all donors on three of the four dimensions of aid quality and last on reducing the burden on partner countries. The United Kingdom ranks in the top third on three of four dimensions of aid quality and scores particularly well on transparency and learning. The Global Fund ranks in the bottom third on fostering institutions but ranks in the top third on the other three dimensions of aid quality, including the top spot in maximizing efficiency.
Topic:
Foreign Policy, Development, Economics, Foreign Aid, and Foreign Direct Investment
Political Geography:
United States and United Kingdom

24. How Has the Developing World Changed since the Late 1990s? A Dynamic and Multidimensional Taxonomy of Developing Countries

Author:
Andy Sumner and Sergio Tezanos Vázquez
Publication Date:
08-2014
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
Many existing classifications of developing countries are dominated by income per capita (such as the World Bank's low, middle, and high income thresholds), thus neglecting the multidimensionality of the concept of 'development'. Even those deemed to be the main 'alternatives' to the income-based classification have income per capita heavily weighted within a composite indicator. This paper provides an alternative perspective: clusters of developing countries. We take 4 'frames' on the meaning of development: economic development, human development, better governance, and environmental sustainability. We then use a cluster procedure in order to build groups of countries that are to some extent internally 'homogeneous', but noticeably dissimilar to other groups. The advantage of this procedure is that it allows us identify the key development characteristics of each cluster of countries and where each country fits best. We then use this taxonomy to analyze how the developing world has changed since the late 1990s in terms of clusters of countries and the country groupings themselves.
Topic:
Development, Economics, Governance, and Reform

25. The State of REDD+ Finance

Author:
Marigold Norman and Smita Nakhooda
Publication Date:
09-2014
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
This paper presents a thorough synthesis of available data to illuminate the current global state of finance for reducing emissions from deforestation and degradation (REDD+). It adds to a growing body of work that seeks to understand the size and composition of finance for REDD+ initiatives, as well as the delivery of climate finance more generally. The analysis shows that aggregate pledges of both public and private finance are significant, at more than US $8.7 billion for the period between 2006 and March 2014, but the pace of new pledges slowed after 2010. The public sector contributes nearly 90% of reported REDD+ finance, with the preponderance of funding concentrated among a relatively small number of donors and recipient countries. The paper analyzes early experience with performance-based finance, although such finance represents less than two-fifths of pledges to date. The extent to which new institutions in the climate finance architecture such as the Green Climate Fund will provide a new and effective channel for increasing support for REDD+ remains to be seen.
Topic:
Economics, Environment, International Cooperation, and Politics

26. Self-Selection into Credit Markets: Evidence from Agriculture in Mali

Author:
Dean Karlan, Bram Thuysbaert, Christopher Udry, and Lori Beaman
Publication Date:
09-2014
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
We partnered with a micro-lender in Mali to randomize credit offers at the village level. Then, in no-loan control villages, we gave cash grants to randomly selected households. These grants led to higher agricultural investments and profits, thus showing that liquidity constraints bind with respect to agricultural investment. In loan-villages, we gave grants to a random subset of farmers who (endogenously) did not borrow. These farmers have lower – in fact zero – marginal returns to the grants. Thus we find important heterogeneity in returns to investment and strong evidence that farmers with higher marginal returns to investment self-select into lending programs.
Topic:
Agriculture and Economics
Political Geography:
Africa

27. Publishing Government Contracts: Addressing Concerns and Easing Implementation (Brief)

Author:
Charles Kenny
Publication Date:
11-2014
Content Type:
Policy Brief
Institution:
Center for Global Development
Abstract:
Government contracts regarding the use of public property and finances should be published by default. Many jurisdictions already require that contracts be made public in response to requests for the information; some now publish contracts proactively. Doing so helps new entrants compete in the market for public contracts, helps governments model their projects on other successful examples, and allows citizens greater insight into how their taxes are being spent. This brief, summarizing the conclusions of the Working Group on Government Contract Publication, provides a practical outline for reaping the benefits of open contracts while addressing legitimate concerns about costs, collusion, privacy, commercial secrecy, and national security.
Topic:
Economics and Government
Political Geography:
United Kingdom

28. HIV/AIDS Intervention Packages in Five Countries: A Review of Budget Data

Author:
Amanda Glassman, Denizhan Duran, Rachel Silverman, and Victoria Fan
Publication Date:
10-2013
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
More than ever, global health funding agencies must get better value for money from their investment portfolios; to do so, each agency must know the interventions it supports and the sub-populations targeted by those interventions in each country.
Topic:
Foreign Policy, Development, Economics, Health, Humanitarian Aid, and Health Care Policy
Political Geography:
India, Philippines, Ethiopia, and Nigeria

29. Making Large-Scale Wind and Solar Power a Reality

Author:
Kevin Ummel
Publication Date:
10-2013
Content Type:
Policy Brief
Institution:
Center for Global Development
Abstract:
South Africa and many other countries hope to aggressively expand wind and solar power (WSP) in the coming decades. This presents significant challenges for power system planning. Success hinges largely on the question of how and where to deploy WSP technologies. Well-designed deployment strategies can take advantage of natural variability in resources across space and time to help minimize costs, maximize benefits, and ensure reliability.
Topic:
Climate Change, Development, Economics, Energy Policy, and Science and Technology
Political Geography:
Africa

30. Is Anyone Listening? Does US Foreign Assistance Target People's Top Priorities?

Author:
Benjamin Leo
Publication Date:
12-2013
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
The United States government has made repeated declarations over the last decade to align its assistance programs behind developing countries' priorities. By utilizing public attitude surveys for 42 African and Latin American countries, this paper examines how well the US has implemented this guiding principle. Building upon the Quality of Official Development Assistance Assessment (QuODA) approach, I identify what people cite most frequently as the 'most pressing problems' facing their nations and then measure the percentage of US assistance commitments that are directed towards addressing them. By focusing on public surveys over time, this analysis attempts to provide a more nuanced and targeted examination of whether US portfolios are addressing what people care the most about. As reference points, I compare US alignment trends with the two regional multilateral development banks (MDBs) – the African Development Bank and the Inter-American Development Bank. Overall, this analysis suggests that US assistance may be only modestly aligned with what people in Sub-Saharan Africa and Latin America cite as their nation's most pressing problems. By comparison, the African Development Bank – which is majority-led by regional member nations – performs significantly better than the United States. Like the United States, however, the Inter-American Development Bank demonstrates a low relative level of support for people's top concerns.
Topic:
Security, Crime, Development, Economics, and Foreign Aid
Political Geography:
Africa, United States, America, and Latin America